sale of inherited foreign property

[lizC]

My father passed away in 2019.  Under Italy's forced heirship laws, my mother and 6 children inherited ownership of my fathers (U.S. citizen) home in Italy.  We sold the home in 2024 my mother received 1/3 of the proceeds and 6 children received 1/6 each of the remaining 2/3 of the proceeds.  The sale price was $44,000. 

First question is, do we all need to report receiving this money?  

Second question is, if we do need to report it, then do we divide up the cost basis also in similar portions?  The FMV of the home basically did not change from my fathers death in 2019 to the time the house was sold in 2024, which is a very low FMV.

Third question is, if we are required to report this sale, do we use forms Schedule D and 8949?

Thank you

[RobertB4444]

You are required to report the sale.  

As you surmised the basis is divided among the heirs in the same way that the proceeds were.  It will be entered on schedule D and form 8949, although in TurboTax you will just scroll down all the way to the bottom of the Wages and Income section of your federal return and find "Less Common Income".  About midway down that section is an entry for 'Sale of Home'.  

Click on that and enter the information about the sale and the system will put the information on the proper forms for you.

@lizC 

[lizC]

Under other income, sale of home, this is only for the sale of your main home.  It says to report other sales of homes in investment income but it doesnt say which section there

[SharonD007]

You will enter the sale of your inherited property in Investments in the Wages & Income Section. Refer to the TurboTax Help article Where do I enter the sale of a second home, an inherited home, or land on my 2024 taxes?

When you get to the screen below, select Other 1099-S. Even though you may not have a 1099-S, you can enter the information without one.

[avattax25]

Hi @SharonD007 ,

I have the same situation. Where/how do I enter foreign taxes paid on the property sale in the online version to take FTC?

Thanks!

[DaveF1006]

Here is how to claim your foreign tax credit in TurboTax.

1. Go to Federal
2. Deductions and credits 
3. Estimate and other taxes paid 
4. Foreign Tax Credit>start or revisit
5.  As you go through the screens, when it asks "Tell Us About Your Foreign Taxes" select none of these apply.
6. When it asks if you wish to take the deduction and credit, take the credit.
7. Continue through until you reach a screen that says "No other income or expenses" Say no
8. Continue through until it asks the income type, say Passive Income
9. Next add a country pick India
10. Other Gross Income say Sale of Personal Property and the Gross Amount of the sale
11. Continue through the interview until it asks for the foreign taxes you paid, here record the amount.  
12. Now you are done reporting the foreign taxes. Just keep going through the section without making any more entries. You will have finished reporting your gross income from the sale and the foreign taxes paid.

[avattax25]

Hi @DaveF1006,

Since I have FTC from a 1099-Div statement, it is not allowing me to go through this flow, steps 7 to 11.

If I go through the report income flow, it is trying to tie the tax to the US 1099-Div, not able to add income from foreign sources as describe in step 7-11.

I see these screens

[DaveF1006]

Yes, since you have a Foreign Dividend already reported in your return, follow these steps instead.

1. Go to Federal
2. Deductions and credits 
3. Estimate and other taxes paid 
4. Foreign Tax Credit>start or revisit

As you begin working in the section, the program will recognize you have already made an entry regarding foreign taxes in your 1099 DIV. 

1. It will first ask you to verify where the dividend income came from.
2. Next screen you will select report income in the radio button
3. In the next screen, put a checkmark in the box that says select 
4. The next screen will verify the amount of foreign-source income the foreign tax was derived from.
5. After this is done, you are done reporting foreign income. If it asks you if you wish to review your entries, you can say no.
6. Next it'll ask you making a simplified election for AMT.  if you made this in previous years, you  check the box. Usually if your only income has been passive in previous years, you may have made this selection. You may need to look at last year's return to verify this.
7. Keep navigating the screens. When a screen appears telling you to choose an income type, choose passive income.
8. Press done in the next screen.
9. Press Continue through the next screens that appear until you reach Foreign Tax Credit Carryovers. Here is where you will report Carryovers from previous years.

[avattax25]

@DaveF1006 How do use/keep entry of the US 1099-Div, and also enter additional tax paid from the sale of foreign property capital gains?

[DaveF1006]

t

To clarify, have you entered your 1099 DIV as income already? 

[avattax25]

Yes but that US-based income, I want to enter the foreign sales(which I'm able to do following directions from earlier par of the chat) and taxes paid as well, which I'm not able to do especially taxes paid.

[DaveF1006]

If you reported a ‌foreign tax paid in Box 7 of the 1099 DIV, there is a follow-up screen that asks for foreign dividend information and the country the dividend was paid in. See the first screenshot below that shows how this screen appears. Once you enter the 1099 DIV, the first screen asks if there should be an adjustment made for US based income and the screen that follows asks the amount of foreign dividends. See the first screenshot below that illustrates the appearance of this screen. 

Once you enter this information, this will populate in the Foreign Tax Credit section and you will apply the second set of steps I outlined above. 

For the foreign capital gains, you would enter this in US income as a stock and bond sale.  In the FTC form, you would need to enter the amount of capital gain income you were taxed on in India as gross income and then the taxes that you paid on the distribution.

Just an FYI, as soon as you report your 1099 DIV information in the Foreign Tax credit section, scroll though the program until you reach a country summary page. Here select Add a country and then select add foreign tax. Then you will be able to add the details regarding the capital gains.  Here is the screen you should see after entering your 1099 DIV information.